Your Edmonton tax team for everything when it comes time to changing ownership in your business
Your Edmonton tax team for private enterprise tax matters
In order to help ensure you maximize the value of your business and minimize your tax burden, you should have a transition plan in place at least five years before any change in ownership. Each organization can have different requirements and goals when it comes time to sell or transition the company to a new owner. However, the following are key facets of your business that you should start evaluating if you are contemplating transitioning ownership of your business:
Depending on your particular situation, it may be advantageous to restructure your business before considering a future ownership transition to optimize the value.
Whether your ownership transition involves transferring the business to the next generation of family, selling to employees or a third-party, having the right structure in place can help facilitate a more efficient sales process to meet your personal objectives and maximize shareholder value.
Canadian private businesses have many options to enhance their tax status and lower their overall tax burden. It may be possible for the individual shareholders to realize the capital gains exemption to offset capital gains realized on a disposition of shares. Each individual Canadian taxpayer is eligible to claim a lifetime capital gains exemption of $866,912 in 2019 (indexed for inflation in future years).
Early evaluation of the structure of your business is key in determining if your business would be eligible for the capital gains exemption.
2. Retaining a Strong Management Team
In many cases, key employees can be vital to the success of a business, and the employment arrangements can be an important factor in maximizing the value of the business. Do you understand how the transition of ownership could affect your key employees and the value of your business?
3. Tax Aspects of a Business Transition
Determining the value you will receive and the tax payable on an ownership transition of a business, is primarily a numerical analysis which depends on whether the sale is structured as a sale of assets or a sale of shares. In the right circumstances, it may be possible to maximize the ultimate return on your investment by combining both approaches in a hybrid sale of your business. However, optimization is often compromised because of business and legal issues that are difficult to resolve without sufficient lead-time.
If you are a business owner in Edmonton or northern Alberta, we can help. Our KPMG Enterprise advisers in Edmonton can help you prepare so that when the time comes, you are confident in your future plans and in the structure and value of your company. If you have questions on how to sell or transition your business to new owners, or are simply looking to retire, please reach out to one of our experienced Edmonton advisers.
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